KUALA LUMPUR (May 31): RHB Investment Bank Bhd expects the impact of Movement Control Order (MCO) 3.0 to be limited and has maintained its gross domestic product (GDP) growth forecast of 5.4% year-on-year.

In a Global Economics & Market Strategy note today, RHB group chief economist & head, Market Research Dr. Sailesh K. Jha said Malaysian consumers’ adaptability and robust external sector will be the offsetting factor.

“In addition, a possibility of further support by the government cannot be ruled out.

“As a result, we expect USD/ringgit trading range to move up to 4.150-4.200.

“We maintain our view that USD/ringgit will hit 4.220 by end-2Q21 and 4.300 by 1Q22,” he said.

Jha said MCO 3.0 is a temporary setback.

“However the path of 2H21 headline GDP and private consumption GDP growth will be more modest compared to our earlier assessment,” he said.

Jha said the economy was on a decent recovery path in 1Q21 on a quarter-on-quarter basis, with headline and private consumption GDP surprising us on the upside at -4.1% and 0.9%, respectively.

“The contraction of headline GDP was mainly due to weak public infrastructure spending and weak public consumption spending along with strong imports.

“Private consumption and investment GDP accelerated in 1Q21.

“Hence, if MCO 3.0 wasn’t imposed, we would have had to upgrade our 2021 GDP growth forecast of 5.4% to around 6% on back of stronger than expected consumer spending,” he said.